A Guide to Credit Card Practices around the World

A Guide to Credit Card Practices around the World

For those of us that grew up in the United States, it’s pretty easy to take the ubiquity of credit cards for granted. With hundreds of millions of credit cards in circulation, Americans charged more than $4 trillion dollars on their credit...

For those of us that grew up in the United States, it’s pretty easy to take the ubiquity of credit cards for granted. With hundreds of millions of credit cards in circulation, Americans charged more than $4 trillion dollars on their credit cards this past year alone. Currently, the nation owes nearly $900 billion in credit card debt, reflecting the average household debt of over $7,000. While this may seem normal to Americans, the reality is that credit card practices around the world vary tremendously by country, and credit cards function differently in various cultures.

What Happened to Cash?

In the United States, the popularity of credit cards has led to fewer transactions being completed with cash. Presently, less than half of all transactions completed in the U.S. involve cash, which is not the case in many other Western countries. For example, in Germany, the overwhelming majority of transactions—more than 80%—are still completed using cash, and credit cards are hardly used at all. Even when it comes to large transactions, Germans are hesitant to pull out their credit cards, and many of them don’t even own a single card.

One of the primary reasons that in certain countries, particularly in Germany, people don’t like buying on credit is that there’s a strong aversion to being in debt. In fact, in German the word for “debt” comes from the same linguistic root as the word “guilt,” signifying how negatively being in debt is perceived. This could explain why less than one-fifth of transactions in Germany are done via credit card.

Furthermore, some countries prefer using plastic to cash, but still don’t use credit cards Americans do. Good examples of this phenomenon can be found in France and Israel, where debit cards are extremely popular but credit cards still haven’t caught on as they have in the U.S.

Spending Isn’t the Whole Picture

In the United States, we possess more credit cards per capita than our Canadian neighbors to the north, but that’s only part of the picture. When one takes a closer look at the amounts which Americans and Canadians charge to their credit cards each year, it’s the Canadians who spend more money. But more importantly, even though Canadians charge nearly double the amount to their cards ($7,500 as opposed to $4,000), more than half of them (60%) pay off their balances in full each month.

Similarly, consumers in Australia charge even more on their credit cards than Canadians, but it’s rare for an Australian to own more than a single credit card. Even though they don’t own multiple cards, Australians charge almost all of their monthly bills to their credit cards. Both of these facts indicate why the amount of credit cards that one owns is not the most significant statistic. It’s far more essential to look at which cultures are spending the most, and which ones are paying off their balances in full each month.

Rewards around the World

Although there are cultural factors which can lead to people signing up for more credit cards, another primary motivator needs to be mentioned: credit card perks. In a country like Australia, where the norm is for consumers to pay their bills on credit, credit card providers have to incentivize their cards with great rewards programs. Similar to their counterparts in the U.S., Australians are drawn to their credit cards by attractive rewards including cash back offers and paid travel expenses.

Meanwhile, you’ll be hard pressed to find a credit card in Germany that offers perks on par with those in the U.S. or Australia, since there’s much less of a culture of credit card spending. If you’ve been brought up on credit card perks that are typical in the United States, then expect to be disappointed if you move abroad hoping to find the same credit card conditions as an expat.

Worldwide Credit Card Issuers

Credit card practices do vary from country to country, but credit card issuers in America still dominate the world scene. The top six leading credit card issuers in the world by total spending are all based in the U.S.—JPMorgan Chase, Bank of America, Amex, Citibank, Capital One, and Discover—followed by Chinese credit card issuers. This means that even if you live outside of the U.S., there’s a good chance that your credit card issuer will be a branch of an American bank.

A word of caution: just because it’s the same bank that it’s issuing the credit card, don’t assume that you’ll be able to secure a credit card with the same terms as in the United States. Each country has its own credit card norms, so be sure to take a close look at the interest rate and fees before signing up.

America: #1 Credit Card Paradise

While consumers in other countries may charge more money onto their credit cards than Americans, there’s no country in the world where you’ll find as much diversity in credit card offers as in the United States. Whether you’re looking for no-credit credit card, a gas rewards credit card, or a credit card geared towards college students, you’ll have plenty of options to choose from. If you have excellent credit, or even if your credit score has completed tanked, there are credit card issuers in the U.S. which will compete for your business.

Besides for the plethora of options, another area where Americans frequently come out on top is with credit card perks. Even when compared to the best credit card rewards in other countries, the benefits offered in the United States—including no fees, introductory interest rates, sign up bonuses, and free balance transfers—are compelling reasons to choose your credit card over cash.

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